fiance: ratios Flashcards
1
Q
profitability ratios: gross profit%
A
gross profit% = ( gross profit/net sales ) x 100
2
Q
profitability ratios: profit for the year
A
profit for the year = (net profit/net sales) x 100
3
Q
profitability ratios: return on equity employed ROCE
A
return on equity employed ROCE = (profit for the year/opening capital) x 100
4
Q
liquidity ratios: current ratio
A
current ratio = current assets/current liabilities
4
Q
liquidity ratios: acid test ratio
A
acid test ratio = (current assets - stock)/current liabilities
5
Q
efficiency ratios: rate of inventory turnover
A
rate of inventory turnover = cost of sales/average stock held
6
Q
purpose of ratio analysis
A
- compare performance with previous years
- highlight trends
- aids decision making
7
Q
limitations of ratio analysis
A
- findings don’t take PESTEC into account
- findings don’t show new products
